Egypt’s president warns about economy

CAIRO – Egypt’s Islamist president used his first address before the newly convened upper house of parliament on Saturday to warn against any unrest that could harm the country’s battered economy, and renewed calls for the opposition to join in a national dialogue.

In the nationally televised speech, Mohammed Morsi said the nation’s entire efforts should be focused on “production, work, seriousness and effort” now that a new constitution came into effect this week. He blamed protests and violence the past month for causing further damage to an economy already deteriorating from the turmoil since the fall of autocrat Hosni Mubarak early last year.

In an alarm bell over the economy, the central bank announced soon after Morsi’s speech that foreign currency reserves – which have been bleeding away for nearly two years – are at a “critical” level, the minimum needed to cover foreign debt payments and buy strategic imports.

Morsi’s strongly worded address to lawmakers appeared aimed at sending a message to the mainly liberal and secular opposition not to engage in any new protests, depicting unrest as a threat to the priority of rebuilding.

All sides must “realize the needs of the moment” and work only through “mature democracy while avoiding violence,” Morsi told the 270-member upper house, or Shura Council. “We condemn and reject all forms of violence by individuals, groups, institutions and even from the nation and its government. This is completely rejected.”

He appeared to chide the opposition for not working with him.

“We all know the interests of the nation,” he said. “Would any of us be happy if the nation goes bankrupt? I don’t doubt anyone’s intentions. But can anyone here be happy if the nation is exposed to economic weakness?”

The mainly liberal and secular opposition accuses Morsi of concentrating all power on the Muslim Brotherhood, from which he hails, and other Islamists and steamrolling any alternative voices.

The main opposition groups have refused to join a national dialogue convened by Morsi, saying past talks have brought no compromise. They also stayed out of the president’s appointments last week of a few opposition figures to the overwhelmingly Islamist Shura Council, calling the move tokenism.

The bitterness between the two sides was inflamed by the crisis of the past month leading up to the referendum that passed the new constitution. Mass street rallies were held by both the opposition trying to stop the charter and by Morsi’s Islamist supporters determined to push it to victory. Clashes that erupted left 10 dead. The charter was approved by 64 percent, but with a low turnout of around 33 percent. Civil society groups and the opposition also point to incidents of fraud in the vote they say have not been properly investigated.

Opponents fear the new charter will consecrate the Islamists’ power. The document allows for a stronger implementation of Islamic law, or Shariah, than in the past and has provisions that could limit civil rights and freedoms of minorities.

Morsi has depicted his national dialogue as a chance for all factions to have a voice in planning the next steps and drawing up key legislation to put before the upper house, including a law organizing parliamentary elections. So far, mainly Islamists and only a few small opposition parties are participating.

Liberal former lawmaker Amr Hamzawi said the president’s speech offered no new insights and failed to acknowledge significant opposition to the Islamist-drafted constitution. Hamzawi was among those who walked out in protest of the Islamists’ handling of the draft process earlier this year.

“We need binding mechanisms to amend the flawed constitution, guarantee that the legislative role of the upper house of parliament will be temporary and to ensure fair elections,” he said. “We will not enter into fraud elections each and every time.”

Morsi’s address aimed to set the tone as the Shura Council begins work on a slate of new laws. The upper house normally has few powers but it will now serve as the law-making body until a new lower house is chosen in national elections expected within a few months. Two thirds of the Shura Council members were elected in voting last winter, but few Egyptians bothered to vote, and Islamist allies of Morsi swept the chamber.

The ultraconservative Salafi al-Nour Party, the second strongest party after the Brotherhood’s political wing, suffered a blow this week when its founder and chief Emad Abdel-Ghafour resigned to start a new party, Al-Watan. He took with him around 150 members, including many who were elected to office. The fracturing of the party may bolster the Brotherhood in the coming elections.

In his speech, Morsi repeatedly said it was time to return to “production” and “work.” But he did not give details on an overall economic program, including crucial questions like how the government will tackle a crippling budget deficit or carry out expected tax hikes or reductions of subsidies.

The impending austerity measures are major concerns in a country where some 40 percent of the 85 million population live near or below the poverty line of surviving on $2 a day. Morsi’s government has requested a $4.8 billion loan from the International Monetary Fund to bridge the budget deficit, but talks are on hold after the government reversed plans for tax hikes this month.

Instead, Morsi denounced those who he said were spreading panic about Egypt’s economy, saying the country will “not go bankrupt.” He underlined that banks were healthy, after a rush to buy dollars the past week over fears of devaluation of the Egyptian pound.

“Those who talk about bankruptcy, they are the ones who are bankrupt. Egypt will never be bankrupt and will not kneel, God willing,” he said to a round of applause.

He directly blamed the past month’s violence for Standard & Poor’s downgrading this week of Egypt’s long-term credit rating one level this week to B-, six steps below investment grade.

Morsi presented the country’s foreign currency reserves, currently at $15 billion, as up slightly from last year, though he acknowledged they were still down dramatically from around $36 billion in 2010.

After last year’s anti-Mubarak uprising, foreign investment and tourism – one of the country’s biggest money makers – dried up. With fewer dollars coming in, the central bank has been spending reserves furiously to prop up the currency and pay for key imports. The slight uptick in reserves from last year is mainly due to hundreds of millions of dollars provided by the Gulf nation of Qatar.

In its statement Saturday, the central bank announced the introduction of a new auction system for banks buying and selling U.S. dollars, urging citizens to “ration usage” of foreign currency in favor of the Egyptian pound.

Amr Adly, who heads the Social and Economic Justice Unit at the Egyptian Initiative for Personal Rights, said Morsi’s speech failed to outline a real economic recovery plan.

“We need to know the reality of the economic situation and have an idea of the measures that will be taken to address this situation,” Adly said. “We are not bankrupt yet because we can still service the debt, but we are on the verge of bankruptcy.”